Alright, CHECK THIS OUT!
Someone I follow closely has some very interesting info to share tonight. Why should you care? Because this person has NAILED this thing to a 'T'. A week ago, they said the complete opposite of what just about every person coming on CNBC was saying. Everyone was calling for SPX 1000, bla bla bla and to buy every dip. Even on Fast Money they were calling for last Thursday to be bought as 'your dip' if you missed the rally.
Last week, this person I follow said that if the market is to follow the 1930s scenario, as it has almost to perfection so far, then the next thing that would happen would be for the market to stop at its 2/3 speed resistance line from the Oct 2007 high to the March bottom and the 25.8% envelope below the 2 year moving average. Don't worry about what that all means. Just know that that is exactly what happened on the big rally off the 1929 crash low's reaction rally. That rally lasted exactly 70 calander days. This week is the 70 day mark for this rally.
Now, I think it was that 935 level or so that was the mark of those levels above. What happened? So far a near 50 point decline in less than a week. What next?
This is where things get interesting. Why? Well, first, everyone I see on TV is saying to buy SPX around 875 if we get there and that there is no way on Earth you'll see a retest of the lows because the reason we hit those lows was due to panic forced margin selling, not fundamental factors. Well, yeah. But if we follow the 1930s model as we've been doing, then this could be the beginning of a new leg down to new lows.
Now get this - the new 1st downside projection for the SPX is 857.42 and 8119 on the DOW. The DOW MUST be above 8350 and the SPX above 892 at 8:45am PST tomorrow in order for those projections to NOT be confirmed and thus the market should head higher. If not, then most likely you'll see those levels shortly.
It's too soon to tell if this is the setup of a new major leg down. Of all people, Cramer sounded like he is tilting in the direction of a new leg lower.
If you see the ES trade under 850 tomorrow, expect a somewhat large reversal upward. However, that's just a trade. Things could be getting a bit dicey soon.
